Jensen Comment
I highly respect this video, although it tends to not blame the major source of
the fraud on Main Street --- that blame that falls on government for pressuring
Fannie Mae and Freddy Mack to buy up millions of mortgages generated on Main
Street without having any recourse to the banks and mortgages companies who
knowingly granted mortgages without to borrowers who could never repay those
loans. This was compounded by granting loas way in excess of collateral value
such as when Fannie Mae had to buy a fraudulent loan of $103,000 on a shack that
Marvene (a woman on welfare and food stamps) purchased for $3,000.
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze
Barney's Rubble ---
http://www.trinity.edu/rjensen/2008Bailout.htm#Sleaze

Jensen Comment
This does not mean that there were no differences between majors. For example,
women finance graduates earned about $6,500 less than men majoring in finance,
but they may have been paid more than women in management and marketing.
I do not know that this is the case, but as in the case of comparing inequality
between nations, it's important to note that the degree of equality is not
nearly as important as the level of poverty. For example, the Gini Coefficients
of equality are about the same for Canada and North Korea, but the absolute
differences in poverty are immense.

Accounting firms probably do not hire many MBA graduates from Michigan since
Michigan has a separate Masters of Accounting Program ---
http://www.bus.umich.edu/Admissions/Macc/Whyross.htm
It would surprise me if there were any gender differences in salary offers in
this MAC program, although there may be some racial differences where top
minority graduates have higher offers than whites.

The one question about all this that I would raise is job location. At
Trinity University when I was still teaching we sometimes placed a single
graduate from our very small MS in Accounting graduating class at a higher
salary in San Francisco or some other city having very high living costs.

The ANOVA statistician in me questions gender comparisons across geographic
cells having greatly varying living costs. For example the MBA woman landing a
consulting job for $140,000 in San Francisco or Geneva really cannot compare her
salary with the woman who gets $140,000 in Detroit. In Detroit some relatively
nice houses are being given away free to people who will occupy them full time.
The exact same house in San Francisco might sell for $845,000. So much for
declaring that both women are being paid the same.

It's also difficult to compare salary offers that are variable. For example,
it's common to offer base salary plus commissions for majors in marketing and
finance for stock brokers and other sales jobs.

In the 1990s it would've also been difficult to compare some salary offers
for graduates in finance and computer science. For example, I know about a
Stanford Computer Science graduate who was paid minimum wage plus $1 million in
stock options. I think this type of hiring declined when the 1990s technology
bubble burst and FAS 126R went into effect. FAS 123R pretty much killed stock
option compensation.

At the University of Texas MBA women graduates edged out men in terms of
compensation offers
At the University of Michigan female and male MBA graduates average about the
same compensation offers
Why are women MBA graduates from Stanford not faring as well as their male
counterparts?

The gender pay gap at Stanford’s
Graduate School of Businesshas female graduates
earning 79¢ on the male dollar, the widest discrepancy in earnings between
men and women at any of the top 30 business schools, according to
new research from Bloomberg Businessweek.

That disparity may seem large, but it isn’t
startling to many of the women in the Stanford Class of 2012, who say the
figures largely indicate the wide range of career choices they are making.

Take Shan Riku, who worked as a consultant at
McKinsey before business school and is now working as head of new business
development at Cookpad, Japan’s largest recipe-sharing website. Riku admits
she took a pay cut in accepting the position but says she was more
interested in taking on a role that would challenge her. It also didn’t hurt
that Cookpad encourages families to cook and spend time together. “Many
women at Stanford tend to make choices that are a little bit more focused on
‘how do I want to balance my life,’ rather than ‘how can I earn a lot of
money,’” she says.

Pulin Sanghvi, director of the career management
center at Stanford’s business school, says most of the pay gap at his school
can be “attributed to industry choice.” According to Sanghvi, women and men
at Stanford who go into the consulting or Internet technology sectors tend
to have average starting salaries that are close or equivalent in size.
Those 2012 MBA graduates who headed into the consulting field received a
mean base salary of $130,636, while others who went into the technology
sector earned $118,050, according to the business school’s most
recent employment report.

The wage gap comes about partly because fewer women
are heading into some of the more lucrative finance fields. For example, 16
percent of male students took jobs in private equity and leveraged-buyout
firms, compared with just 5 percent of women, Sanghvi says. The top four
industries that Stanford women went into in 2012 were information
technology, management consulting, consumer products, and venture capital.

“I think a part of the story of this generation of
students is that they have a much larger playing field in terms of career
choices,” Sanghvi says. “I don’t think the level of income in a job is
necessarily the primary motivator for why someone makes an empowered choice
to pursue a career.”

That’s not to say that women at the school aren’t
thinking long and hard about their salary offers and how to best negotiate
them.

Continued in article

Jensen Comment
This says very little about graduates wanting to become CPAs since Stanford does
not offer a career track for taking the CPA examination. The few graduates who
do seek to become auditors or tax accountants most likely were CPAs before
entering Stanford's MBA program. After graduating they most likely will no
longer seek to work for CPA firms as auditors and tax accountants.

America's philosophy professors are having a party,
the sort of gathering that has become an institution at the annual meeting
of the American Philosophical Association. In a ballroom on the lowest level
of a sprawling downtown hotel here, clumps of men sit talking, laughing, and
drinking beer at big, round tables.

The association calls the gathering a reception,
but everyone here knows it as the "smoker," even though no one is allowed to
smoke anymore. It caps the first day of sessions at the association's
Eastern Division meeting and is not only an occasion for old friends and
colleagues to catch up but also a time for young job candidates to talk
informally with professors at campuses that have faculty openings.

The smoker is also notorious for making women
uncomfortable. Tales abound of how, two decades ago, drunken male faculty
members at the event chased young female job candidates and, more recently,
of female junior professors getting propositioned by their senior colleagues
there.

Some female philosophers who attended the
association's meeting here late last month did not even give the reception a
chance. They skipped it in favor of their own gathering over Domino's pizza
and red wine. "We avoid it at all costs," said Shay Welch, an assistant
professor of philosophy at Spelman College who held the "woman friendly"
party at her home with a couple of dozen people. "It's almost like there is
this tiny parallel universe women have created where women in philosophy
hibernate."

The two gatherings in Atlanta are emblematic of
what's happening in philosophy, where a small group of female professors is
trying to shake up the field. The women want to broaden the discipline to
embrace feminist ideas, raise the number of women in the faculty ranks, and
put an end to sexist remarks and behavior.

But they have found the field more resistant to
change than are many others in academe.

Most philosophy departments and conference meetings
are still saturated with men. More than 80 percent of full-time faculty
members in philosophy are male, compared with just 60 percent for the
professoriate as a whole, according to 2003 data compiled by the U.S.
Education Department, the latest available.

Women at the conference here didn't miss
opportunities to observe how isolated they felt: One who waited in line at
the hotel's Starbucks said she had counted 10 men in the line, plus her. The
16.6 percent of all full-time faculty members in philosophy who are female
constitutes the lowest proportion of women in any of the humanities and is
lower than the proportion of women in traditionally male fields like
mathematics and computer science.

At the meeting in Atlanta, the association's
Committee on the Status of Women sold black-and-white buttons that said:
"Philosophy: Got Women?" A very explicit blog, "What is it like to be a
woman in philosophy?," publishes horror stories by women describing sexual
harassment and gender bias on their campuses and at scholarly meetings. A
new petition, started by men, encourages senior male philosophers to refuse
to speak at philosophy conferences that include few, if any, female
presenters; it has about 1,000 signatures.

"There is a groundswell of movement right now,"
said Linda Martín Alcoff, a professor of philosophy at Hunter College of the
City University of New York, who is president of the association's Eastern
Division.

'Jerks in
Philosophy'

Ms. Alcoff and other women say that despite the
overwhelmingly male nature of their discipline, faculty members picked her
as president in part because those who vote in the association's elections
are more likely than others to endorse change, and because the association's
nominating committee assembled a diverse slate of presidential candidates,
including a black male and two feminist philosophers. "One of my goals is to
increase diversity," Amy Ferrer, the association's new executive director,
told The Chronicle.

She is hardly the first to try. The Society for
Women in Philosophy has been promoting women's work in the field since 1972,
and Hypatia: A Journal of Feminist Philosophy was established in
the mid-1980s. In November the philosophy association created a new Ad Hoc
Committee on Sexual Harassment to study the problem. The action came exactly
20 years after the organization first issued a statement condemning sexual
harassment. While complaints of harassment may have dropped to a trickle in
most academic fields, in philosophy the issue remains a major problem.

"Where else but in the U.S. military are women the
targets of such regular abuse by their own close colleagues?" Ms. Alcoff
wrote in a 2011 issue of the association's Newsletter on Feminism and
Philosophy.

While Ms. Alcoff said she doesn't like the way
women have historically been treated at the smoker, she has not endorsed
abandoning it, because all association meetings have social gatherings. But
the harassment, she said, must stop.

Next fall the association's Committee on the Status
of Women will begin visiting campuses to evaluate the treatment of women in
philosophy departments and recommend changes.

Some prominent men in the field say sexual
harassment is real. "There are some jerks in philosophy," said Walter
Sinnott-Armstrong, a professor of philosophy at Duke University who sits on
the association's Board of Officers and supports the committee to study
sexual harassment. "I have seen people hitting on female philosophers where
I thought they shouldn't."

Continued in article

Jensen Comment
Philosophy Departments now tend to have the lowest numbers of majors on campus:

... Here is how the numbers have changed from
1970/71 to 2003/04 (the last academic year with available figures):

English: from 7.6 percent of the majors to 3.9 percent
Foreign languages and literatures: from 2.5 percent to 1.3 percent
Philosophy and religious studies: from 0.9 percent to 0.7 percent
History: from 18.5 percent to 10.7 percent
Business: from 13.7 percent to 21.9 percent

In one generation, then, the numbers of those majoring in the
humanities dropped from a total of 30 percent to a total of less than 16
percent; during that same generation, business majors climbed from
14 percent to 22 percent. Despite last year’s debacle on Wall Street,
the humanities have not benefited; students are still wagering that
business jobs will be there when the economy recovers.

This begs the question of whether top Ph.D. candidates in general, men and
women, are opting for disciplines other than philosophy such as medicine,
science, education, and business. It would be interesting to see research
on whether one reason for the miniscule number of female philosophy professors
is due in large measure to self selection of other Ph.D. program alternatives
for women. Since female graduates on average have higher grade averages than
men, it may well be that the proportion of female philosophy professors to male
philosophy professors would soar if the student demand for undergraduates in
philosophy soared across the USA,

A lot of CEOs have gotten on the deficit-reduction
bandwagon, but they’ve often been loath to push for specific proposals,
endorsing instead an overall “framework” for fiscal consolidation that’s big
and bipartisan.

That’s now starting to change: A group of the
country’s leading CEOs from the Business Roundtable has put out an
entitlement reform plan that proposes to raise the eligibility age for both
Social Security and Medicare to 70.

Leading Republicans have long rallied to raise the
eligibility age for Social Security to 70, but the Business Roundtable’s
recommendations for Medicare go significantly further than the GOP
consensus: During the fiscal cliff negotiations, for instance, Boehner
proposed raising the Medicare eligibility age from 65 to 67 years, while the
CEOs want to push it three years higher.

The group wants a slew of other changes as well:
higher premiums for wealthy beneficiaries, chained CPI and more private
competition for Medicare and private retirement programs.

“Even though most of these modernization
initiatives would be phased in gradually, the immediate benefits would be
enormous. First, they would put Medicare and Social Security on the sound
financial footing needed to provide a sustainable retirement safety net.
This would represent a major step forward in reducing the growth of
government spending,” Gary Loveman, CEO of Caesars Entertainment Corp. and
Business Roundtable participant, wrote in the Wall Street Journal.

The Business Roundtable believes its proposals
would save the government $300 billion in Medicare spending and extend
Social Security’s solvency for 75 years. But the changes would also come
with costs to others as well. By eliminating Medicare coverage for those
between 65 and 70 years old, the plan would send more individuals into
Medicaid and the newly created health-insurance exchanges, as not everyone
would continue to work or be covered by their employers’ insurance, explains
Tricia Neuman, a vice president at the Kaiser Family Foundation.

That would drive up health-care premiums overall in
the exchanges, as there would be older, sicker people getting coverage, says
Neuman. In states that don’t elect to participate in the Medicaid expansion
under Obamacare, lower-income people in their mid- to late-60s could also
become uninsured, particularly those who are in physically demanding jobs
they might not be able to continue until they’re 70. Overall, raising the
eligibility age “would reduce federal spending but would do so in a way that
shifts costs to other payers and raises overall health care costs,” says
Neuman, who’s examined the impact of raising the age to 67.

On the flip side, proponents of the changes argue
that raising the retirement age makes sense given the rise in life
expectancy, and that sacrifices are necessary to ensure the solvency of
entitlement programs. “What has happened to Social Security over years is
because people are living much more longer, it’s moved more toward a
middle-aged retirement system,” says Eugene Steuerle, a senior fellow at the
Urban Institute.

As a result of falling age-specific mortality, life
expectancy rose dramatically in the United States over the past century .
Final data for 2003 (the most recent available) show that life expectancy at
birth for the total population has reached an all-time American high level,
77.5 years, up from 49.2 years at the turn of the 20th century. Record-high
life expectancies we re found for white females (80.5 years) and black
females (76.1 years), as well as for white males (75.3 year s) and black
males (69.0 years). Life expectancy gaps between males and females and
between whites and blacks persisted.

In combination with decreasing fertility, the life
expectancy gains have led to a rapid aging of the American population, as
reflected by an increasing proportion of persons aged 65 and older. This
report documents the improvements in longevity that have occurred, analyzing
both the underlying factors that contributed to mortality reductions and the
continuing longevity differentials by sex and race. In addition, it
considers whether life expectancy will continue to increase in future years.
Detailed statistics on life expectancy are provided. A brief comparison with
other countries is also provided.

While this report focuses on a description of the
demographic context of life expectancy change in the United States, these
trends have implications for a wide range of social and economic programs
and issues that are likely to be considered by Congress.

Earlier this month, Larry Mishel, the president of
the Economic Policy Institute, stood at a lectern in a small hotel
conference room in San Diego and fiddled with a computer until his
PowerPoint presentation flashed on the screen. Mishel then composed himself,
paid tribute to his intellectual opponent sitting in the front row and began
a speech that, he hopes, will reorient the U.S. economy away from the 1
percent or the 0.1 percent and toward the rest of us.

¶ Mishel’s session at this year’s meeting of the
American Economic Association, titled “Inequality in America,” tellingly
coincided with other sessions called “Extreme Wage Inequality” and “Taxes,
Transfers and Inequality.” As the financial crisis wanes, economists are
shifting their attention toward a more subtle, possibly more upsetting
crisis in the United States: the significant increase in income inequality.

¶ Much of what we consider the American way of life
is rooted in the period of remarkably broad, shared economic growth, from
around 1900 to about 1978. Back then, each generation of Americans did
better than the one that preceded it. Even those who lived through the
Depression made up what was lost. By the 1950s, America had entered an era
that economists call the Great Compression, in which workers — through
unions and Social Security, among other factors — captured a solid share of
the economy’s growth.

¶ These days, there’s a lot of disagreement about
what actually happened during these years. Was it a golden age in which the
U.S. government guided an economy toward fairness? Or was it a period
defined by high taxes (until the early ’60s, the top marginal tax rate was
90 percent) and bureaucratic meddling? Either way, the Great Compression
gave way to a Great Divergence. Since 1979, according to the nonpartisan
Congressional Budget Office, the bottom 80 percent of American families had
their share of the country’s income fall, while the top 20 percent had
modest gains. Of course, the top 1 percent — and, more so, the top 0.1
percent — has seen income rise stratospherically. That tiny elite takes in
nearly a quarter of the nation’s income and controls nearly half its wealth.

¶ The standard explanation of this unhinging,
repeated in graduate-school classrooms and in advice to politicians, is
technological change. The rise of networked laptops and smartphones and
their countless iterations and spawn have helped highly educated
professionals create more and more value just as they have created barriers
to entry and rendered irrelevant millions of less-educated workers, in
places like factory production lines and typing pools. This explanation,
known as skill-biased technical change, is so common that economists just
call it S.B.T.C. They use it to explain why everyone from the extremely rich
to the just-kind-of rich are doing so much better than everyone else.

¶ For two decades, Mishel has been a critic of the
S.B.T.C. theory, and that morning in San Diego, he argued that broad
technological innovation has been taking place so steadily for so long that
the rise of computers simply can’t explain the recent explosion in
inequality. After all, when economists talk about technological innovation,
they are thinking beyond smartphones; they’re usually considering
innovations that affect production. Business innovations — like the
railroads, telegraph, Henry Ford’s conveyor belt and the plastic extruders
of the 1960s — have occurred for more than a century. Computers and the
Internet, Mishel argued, are just new examples on the continuum and cannot
explain a development like extreme inequality, which is so recent. So what
happened?

¶ The change came around 1978, Mishel said, when
politicians from both parties began to think of America as a nation of
consumers, not of workers. President Jimmy Carter deregulated the airline,
trucking and railroad industries in order to help lower consumer prices.
Congress chose to ignore organized labor’s call for laws strengthening union
protections. Ever since, Mishel said, each administration and Congress have
made choices — expanding trade, deregulating finance and weakening welfare —
that helped the rich and hurt everyone else. Inequality didn’t just happen,
Mishel argued. The government created it.

¶ After Mishel finished his presentation, David
Autor, one of the country’s most celebrated labor economists, took the
stage, fumbled for his own PowerPoint presentation and then explained that
there was plenty of evidence showing that technological change explained a
great deal about the rise of income inequality. Computers, Autor says, are
fundamentally different. Conveyor belts and massive steel furnaces made
blue-collar workers comparatively wealthier and hurt more highly skilled
crafts­people, like blacksmiths and master carpenters, whose talents were
disrupted by mass production. The computer revolution, however, displaced
millions of workers from clerical and production occupations, forcing them
to compete in lower-paying jobs in the retail, fast-food and home health
sectors. Meanwhile, computers and the Internet disproportionately helped
people like doctors, engineers and bankers in information-intensive jobs.
Inequality was merely a side effect of the digital revolution, Autor said;
it didn’t begin and end in Washington.

¶ For all their disagreements, Autor and Mishel are
allies of sorts. Both are Democrats who have advised President Barack Obama,
and both agree that rampant inequality can undermine democracy and economic
growth by fostering despair among workers and corruption among the wealthy.
This places them in opposition to some right-leaning economists like Gary
Becker, a Nobel Prize-winning professor at the University of Chicago, who
told me a few years ago that “inequality in earnings has been mainly the
good kind,” meaning it rewards those people with the education and skills
most needed, helping the economy.

¶ How are we to make sense of these competing
claims? I asked Frank Levy, the M.I.T. labor economist who hasn’t fully
committed to any one particular view. Levy suggested seeing how inequality
has played out in other countries. In Germany, the average worker might make
less than an American, but the government has established an impressive
apprenticeship system to keep blue-collar workers’ skills competitive. For
decades, the Finnish government has offered free education all the way
through college. It may have led to high taxes, but many believe it also
turned a fairly poor fishing economy into a high-income, technological
nation. On the other hand, Greece, Spain and Portugal have so thoroughly
protected their workers that they are increasingly unable to compete in the
global economy.

¶Catherine Rampell and Nick Wingfield write
about the
growing evidencefor “reshoring” of manufacturing
to the United States. They cite several reasons: rising wages in Asia; lower
energy costs here; higher transportation costs. In a
followup piece, however, Rampell cites another
factor: robots.

¶The most valuable part of each
computer, a motherboard loaded with microprocessors and memory, is
already largely made with robots, according to my colleague Quentin
Hardy. People do things like fitting in batteries and snapping on
screens.

¶As more
robots are built, largely by other robots, “assembly can be done here as
well as anywhere else,” said Rob Enderle, an analyst based in San Jose,
Calif., who has been following the computer electronics industry for a
quarter-century. “That will replace most of the workers, though you will
need a few people to manage the robots.”

¶Robots mean that labor costs don’t
matter much, so you might as well locate in advanced countries with
large markets and good infrastructure (which may soon not include us, but
that’s another issue). On the other hand, it’s not good news for workers!

¶This is an
old concern in economics; it’s “capital-biased technological change”, which
tends to shift the distribution of income away from workers to the owners of
capital.

¶Twenty years
ago, when I was writing about globalization and inequality, capital bias
didn’t look like a big issue; the major changes in income distribution had
been among workers (when you include hedge fund managers and CEOs among the
workers), rather than between labor and capital. So the academic literature
focused almost exclusively on “skill bias”, supposedly explaining the rising
college premium.

¶But
the college premium hasn’t risen for a while.
What has happened, on the other hand, is a notable shift in income away from
labor:.

If the global economy slips into a deep slump,
American manufacturers including motorcycle maker Harley-Davidson Inc. that
have embraced flexible production face less risk of veering into a ditch.

Until recently, the company's sprawling factory
here had a lack of automation that made it an industrial museum. Now,
production that once was scattered among 41 buildings is consolidated into
one brightly lighted facility where robots do more heavy lifting. The number
of hourly workers, about 1,000, is half the level of three years ago and
more than 100 of those workers are "casual" employees who come and go as
needed.

Advances in hardware and software mean it's
possible to automate more white-collar jobs, and to do so more quickly than
in the past. Think of the airline staffers whose job checking in passengers
has been taken by self-service kiosks. While more productivity is a
positive, wealth is becoming more concentrated, and more middle-class
workers are getting left behind.

What does it mean to have "technological
unemployment" even amidst apparent digital plenty? Technology Review
spoke to McAfee at the Center for Digital Business, part of the MIT Sloan
School of Management, where as principal research scientist he studies
new employment trends and definitions of the workplace.

What if you sat down in the concert hall one
evening to hear Haydn’s Symphony No. 44 in E Minor and found 5 robots
scattered among the human musicians? To get multiple audiences in and out of
the concert hall faster, the human musicians and robots are playing the
composition in double time.

Today’s orchestras have yet to go down this road.
However, their traditional ways of doing business, as economist Robert J.
Flanagan explains in his new book on symphony orchestra finances, locks them
into limited opportunities for productivity growth and ensures that costs
keep rising.

Philip M. Parker, Professor of Marketing at INSEAD Business School,
has had a side project for over 10 years. He’s created
a computer system that can write books about specific subjects in about 20
minutes. The patented algorithm has so far generated hundreds of thousands
of books. In fact, Amazon lists over 100,000 books attributed to Parker, and
over 700,000 works listed for his company, ICON Group
International, Inc.This doesn’tinclude the private works, such as internal reports,
created for companies or licensing of the system itself through a separate
entity called
EdgeMaven Media.

Parker is not so much an author as a compiler, but
the end result is the same: boatloads of written works.

Jensen Comment
Historically, graduates who could not find jobs enlisted in the military. Wars
of the future, however, will be fought largely by drones, robots, orbiting
orbiting satellites. This begs the question of where graduates who cannot find
work are going to turn to when the military enlistment offices shut down and
Amazon's warehouse robotics replace Wal-Mart in-store workers.

If given a choice, I'm not certain I would want to be born again in the 21st
Century.

"A Tale of Four Tax Returns," NPR, January , 2013 ---
http://video.pbs.org/video/2324404112
These are 2010 tax returns. The examples mention that the Earned Income Tax
Credit allows some low and middle-income taxpayers not only avoid income taxes
but receive cash refunds in excess of what was withheld from paychecks. The
"Tale" seems reasonably well balanced except for its failure to mention how many
low, middle, and high income taxpayers avoid taxes by participating in the
underground economy ---
Case Studies in Gaming the Income Tax Laws ---
http://www.cs.trinity.edu/~rjensen/temp/TaxNoTax.htm
As I've mentioned repeatedly I'm in favor of eliminating lower rates on capital
gains tax rates provided capital gains are indexed for inflation losses.

Question
Why do some charities fear elimination of home mortgage and real estate tax
deductions even if charitable deductions are retained in the tax code?

Answer
Itemized deductions need to exceed a certain threshold to be a tax advantage
relative to the standard deduction. If too many itemized deductions are
eliminated while the charitable contribution deduction is retained, it may no
longer be advantageous for many taxpayers to opt for taking itemized deductions.
Incentives to make charitable contributions thereby decline even if charitable
contributions are still allowed. Even if itemized deduction minimums are
eliminated, the incentives to make charitable contributions for tax purposes may
be destroyed unless taxpayers are contemplating enormous contributions to
charities. This will not be the case for most taxpayers.

Charitable groups notched a big victory in the
year-end tax deal but say the fight to preserve their tax deductions is only
beginning.

The “fiscal cliff” agreement preserved the tax
deduction structure for charitable contributions, a policy that both
Republicans and Democrats have sounded open to changing in recent months.

In fact, the deal signed into law would actually
help spur more donations, according to a study by the Tax Policy Center. But
charitable groups say they fully expect their deduction to be under threat
in the weeks and months to come.

“We are viewing this as an interim victory,” Steve
Taylor, senior vice president at United Way Worldwide, said about the fiscal
cliff deal. “We recognize that it was really good for us, but we also didn’t
spend any time celebrating."

Negotiations over the debt ceiling and looming
automatic spending cuts have yet to heat up, nonprofit officials say, and
Democrats and Republicans still remain deeply divided over how to proceed on
fiscal matters.

“We don’t feel like anything’s secure for this
year,” said Alison Hawkins, the director of external affairs for the
Philanthropy Roundtable, told The Hill. “The sequester cuts, the debt
ceiling — we view all of those as potential threats to the charitable
deduction.”

The fiscal cliff deal is just the latest twist in a
debate over the charitable deduction that has lasted throughout President
Obama’s term in office, with the administration consistently pressing to
limit how much of a deduction wealthy taxpayers can take.

At the same time, the White House pressed
charitable groups to stand with Obama during last year’s battle over raising
tax rates on the highest earners, and charitable groups have been fighting
against deduction caps they say would limit donations from the wealthy.

In addition to preserving the charitable deduction,
the tax deal raised rates on family income above $450,000 a year to 39.6
percent, and increased the top capital gains rate to 20 percent.

Those changes, the Tax Policy Center says, are
projected to increase charitable giving by $3.3 billion, or just over 1
percent, in 2013. Under current law, higher tax rates mean a healthier
deduction for taxpayers who itemize.

The Tax Policy Center also said that another
provision in the cliff deal that worried some non-profits — the
reinstatement of the so-called “Pease” limitation on deductions — would have
“negligible effects on the tax incentive for charitable giving.”

The Pease limitation cuts itemized deductions for
taxpayers over a certain threshold — $300,000 for couples. Pease was
reinstated, along with a reduction of personal exemptions for the wealthy,
after being phased out in the 2001 tax deal.

But Hawkins said that her group would seek an
exemption for charitable donations from the Pease limitations, and that
reinstating Pease could set the stage for further chipping away at
deductions.

“Anything that could potentially tinker with or
limit deductions, we’re opposed to,” she said.

Taylor said United Way Worldwide had expected Pease
to come back, and predicated that the combination of a preserved charitable
deduction and higher tax rates would lead to more robust donations this
year.

But Taylor also said that local United Ways had
already expressed concern about the Pease limitations, and that the mere
enactment of a limit on deductions could lead to fewer donations. Local
United Way officials are scheduled to come to Washington to discuss tax
issues with policymakers next month.

Charitable groups are also concerned that the cliff
deal checked off some of the more high-profile proposals, especially on the
tax side, with negotiations over the debt ceiling, the sequester cuts and
even a government spending agreement still looming.

Almost immediately after the recent deal, Obama
started pushing for further tax changes that he said would take away
deductions that are available to the rich, yet out of reach for most
taxpayers.

“I guess to the extent that Congress may be
unwilling to revisit tax rates, that does seem to put limits on deductions
even more in the forefront,” Taylor said.

And with both Democrats and Republicans continuing
to press for changes to the tax code, albeit in different ways, charitable
groups say they have no idea when their fight will be over.

The White House, for instance, has said its
proposal to cap deductions at 28 percent, instead of the top marginal tax
rate, is about fairness as well as finding new revenues.

“If they continue to put forward the 28 percent
proposal, we’re not going to consider this over,” Hawkins said.

Taylor said that he felt more confident about
congressional support for the charitable deduction. But he also acknowledged
that the deduction could be on the chopping block until the debate over tax
reform is done, and Washington’s search for revenue is over.

SUMMARY: "The bill that cleared Congress Tuesday boosts the tax
rate for single filers making more than $400,000 and married couples filing
jointly making more than $450,000, or roughly the top 1% of filers. But
provisions that reduce the value of personal exemptions as well as most
itemized deductions, including those for mortgage interest and state
income-tax payments, will affect about twice as many people since they carry
a lower income threshold-$250,000 for singles and $300,000 for married
couples."

CLASSROOM APPLICATION: The article can be used in a tax class
covering individual taxation. One question addresses a graphic that can be
used in a governmental accounting class.

QUESTIONS:
1. (Introductory) Based on your reading of the article, list the
major changes to individual income taxes coming in 2013, due to the
legislation designed to avoid the "fiscal cliff."

2. (Advanced) What is the "fiscal cliff"? Has its economic impact
been avoided via the legislation signed into law on January 1, 2013? Explain
your answer.

3. (Introductory) Access the graphic entitled 'Cash Flow' in the
online version of the article. To whom is the cash identified in the graph
flowing? Over what time period will the cash flow occur?

4. (Advanced) Click on the related video in the article. What
payroll tax changes will be implemented in 2013 as a result of the
legislation implemented on January 1, 2013? In your answer, state the
difference between payroll taxes and income taxes from both an individual
taxpayer's perspective and from the perspective of the government use of the
tax receipts.

5. (Advanced) When will these law changes impact practicing
accountants' workloads?

6. (Advanced) One of the goals often stated by U.S. leaders is tax
simplification. Based on your understanding of the tax law changes, do you
think this goal is being supported or achieved? What factors in the article
hinder attempts at tax simplification?

7. (Introductory) Based on statements in the article, when is
Congress expected to renew efforts at tax code simplification?

One of the biggest tax increases in the
fiscal-cliff bill is also one of the least understood: a set of limits on
tax deductions and other breaks that will hit far more households than the
bill's rate increases for top earners.

The bill that cleared Congress Tuesday boosts the
tax rate for single filers making more than $400,000 and married couples
filing jointly making more than $450,000, or roughly the top 1% of filers.

But provisions that reduce the value of personal
exemptions as well as most itemized deductions, including those for mortgage
interest and state income-tax payments, will affect about twice as many
people since they carry a lower income threshold—$250,000 for singles and
$300,000 for married couples.

Those new limits drew complaints from some groups
that benefit from deductions, particularly charities that depend on
tax-deductible donations. They worry that new curbs on deductions, coupled
with other taxes on higher-income Americans, will put a damper on giving.

"We are concerned," said Diana Aviv, president of
Independent Sector, a coalition of foundations, nonprofits and other
charitable groups. "The big question for us now is, if we are [also]
increasing rates on folks…does the combination create a greater disincentive
for people to give?"

Enlarge Image image image

The debate foreshadows bigger fights in 2013, when
Congress likely will try to overhaul the federal tax code, in part by
further narrowing tax breaks.

The new limits are "like another cannonball being
fired across our bow," said Jerry Howard, chief executive of the National
Association of Home Builders. "Clearly, it shows that the notion of limiting
deductions is still one that's being considered by policy makers."

But a J.P. Morgan analyst, Michael Feroli,
predicted that the new tax-break limits "should not directly affect…giving
to charities or taking on more mortgage debt."

The limits—known as PEP and Pease—were originally
part of a budget deal passed by Congress in 1990, and were in effect for
more than a decade. The Bush-era tax cuts of 2001 gradually got rid of PEP
(which stands for "personal exemption phaseout") and Pease (named for a
Democratic congressman who pushed for the deduction limit).

Now the fiscal-cliff bill calls for their return,
at least for higher-income people.

The PEP and Pease limits work on the same basic
principle, limiting the value of exemptions and deductions for households
that exceed a threshold. For example, the Pease limitation reduces a
household's itemized deductions by 3% of the amount over the threshold. The
reduction can't exceed 80% of the total deductions.

A couple with income of $400,000 average about
$50,000 in itemized deductions, according to IRS statistics. Because their
income would exceed the $300,000 threshold by $100,000, their allowed
deductions would be reduced by about $3,000 to $47,000—potentially boosting
their tax bill by about $1,000.

The original proponent of the deduction limit, the
late Rep. Donald Pease of Ohio, viewed it as "the best available means…to
ensure that nobody could game the system," given the growing number of tax
breaks that were being passed by Congress, said William Goold, his former
chief of staff. The limit might be viewed now as dated, but "the goal
remains as valid now as it did then," he added.

From a political standpoint, the limits allow the
Obama administration to achieve its long-sought goal of raising taxes on
people making more than $250,000. PEP and Pease represent about $150 billion
of the tax increase of about $620 billion over 10 years, making them a key
element of the deal.

But some groups that benefit from itemized
deductions—charities, for example—worry that the Pease provision might cause
donors to be less generous.

The national taxpayer advocate has recommended
that taxpayers be allowed to tell the IRS to accept their return only when filed
on paper, thus preventing e-file tax-identity theft. So far the IRS has
failed to allow this. Less effective methods are to request an "electronic
filing PIN," available at www.irs.gov, and file Form 14039, "Identity Theft
Affidavit," so that the IRS might apply additional return-screening procedures.
Sadly, conventional credit-monitoring services are useless against income-tax
identity theft.
"E-Filing and the Explosion in Tax-Return Fraud Identity-theft cases rocketed
to 1.1 million in 2011 from 51,700 in 2008. The IRS has a backlog of 650,000,"
by Jay Starkman, The Wall Street Journal, January 13, 2013 ---
http://professional.wsj.com/article/SB10001424127887323374504578222130665022160.html?mod=djemEditorialPage_t&mg=reno64-wsj

Now that Americans finally know the tax rate
they'll be paying, it's time to start thinking about the annual drudgery of
filing their returns. It's also the season when identity thieves begin
ripping off those returns and stealing billions in false or misdirected
refunds. Tax fraud, amazingly, is now the third-largest theft of federal
funds after Medicare/Medicaid and unemployment-insurance fraud.

Tax-identity theft exploded to more than 1.1
million cases in 2011 from 51,700 in 2008. The Treasury Inspector General
for Tax Administration last summer reported discovering an additional 1.5
million potentially fraudulent 2011 tax refunds totaling in excess of $5.2
billion.

Why has identity theft rocketed through the
Internal Revenue Service? Because American taxpayers, urged on by the IRS,
have taken to filing their income-tax returns electronically and arranging
for refunds to be directly deposited into bank accounts. E-filing is
appealing because it provides an electronic postmark confirmation that the
return was filed on time. When it is combined with direct deposit, a refund
can arrive in as little as seven days. In 2012, 80% of individual returns
were e-filed, fulfilling an initial goal Congress set in 1998. The result is
an automated system in which the labor burden is transferred to the
taxpayer.

E-filing contributes to tax complexity as the IRS
demands ever more data for reporting of wage, interest and brokerage income
with more tax forms. A discrepancy may result in a rejection code, a letter
from the IRS Automated Underreporting Unit, or a computerized audit out of a
centralized IRS office in Ogden, Utah. There's no cost to the IRS for
requesting extra information when it's received electronically.

Targeting taxpayers for audit is a major factor
behind the IRS's push for e-filing. E-filed returns are available for audit
several months sooner than paper returns, allowing more time before the
three-year statute of limitations expires. The IRS has even boasted that its
e-file database is "a rich and fertile field" for selecting audits and has
estimated that if its "screeners could be reallocated to performing audits,
they could bring an additional $175 million annually."

Fraudulent tax returns can come in the form of
tax-identity theft, refund fraud, or return-preparer fraud and are difficult
to prosecute. With e-filing, evidence of fraud is difficult to find. There
are no signed tax forms, envelopes or fingerprints, and e-filing promises
quick refunds.

It's easy for criminals to e-file using a real name
and Social Security number combined with a phony Form W-2 (wages) or
fabricated Schedule C (business income). The refund can be posted to an
anonymous "Green Dot" prepaid Visa or MasterCard MA +0.20% purchased at a
drugstore. Such cards have a routing and account number suitable for direct
deposit. The IRS may even correct a fraudulent return to refund the
estimated taxes that the real taxpayer already remitted, as happened to one
of my victimized clients.

Another form of fraud is when an unscrupulous
return preparer modifies the bank-routing information on a return so the
direct-deposit refund will wind up in his own bank account. He might
increase the deductions so a return will show a larger refund due, with only
the increase routed to his bank account. The victim will know nothing unless
the IRS sends an audit notice.

Other preparers have abused the return information
of former clients to file false refund returns in subsequent years.
Criminals have established physical offices and websites displaying names of
major tax-preparation franchises in order to gain genuine return documents
and signatures from unsuspecting victims.

The IRS will replace a lost or stolen refund check.
However, a stolen refund using an altered or erroneous routing number on a
tax return will generally not be refunded until the bank returns the funds
to the IRS. Otherwise, the taxpayer's sole recourse is a lawsuit against the
return preparer.

Millions of Americans now pay the IRS via an
Electronic Federal Tax Payment System debit. Unlike ordinary creditors paid
electronically, the IRS is in the business of sending refunds but it doesn't
compare names on bank records against its own files. So, with just the
routing information from a personal check, a skilled criminal can use the
electronic tax-payment system to transfer funds from a victim's bank account
as an estimated-tax payment to another stolen name and Social Security
number, then file a refund claim transferring the stolen funds to his own
account. (This can be prevented by having your bank place an "ACH debit
block" on your account.)

Fraud is a major problem for states, too. Using
TurboTax, a 25-year-old woman e-filed a fraudulent 2011 Oregon return
reporting wages of $3 million and claiming a $2.1 million refund—and the
Oregon Department of Revenue sent her the refund. In October, a hacker stole
3.8 million unencrypted tax records from the South Carolina Department of
Revenue. Georgia reports that 4% of its returns are fraudulent.

If you become a tax-identity theft victim,
immediately seek a referral to the IRS Identity Protection Specialized Unit
or the Taxpayer Advocate Service using Form 911. Keep in mind that it can
take over a year to resolve. The IRS has a backlog of 650,000 cases.

The national taxpayer advocate has recommended that
taxpayers be allowed to tell the IRS to accept their return only when filed
on paper, thus preventing e-file tax-identity theft. So far the IRS has
failed to allow this. Less effective methods are to request an "electronic
filing PIN," available at www.irs.gov, and file Form 14039, "Identity Theft
Affidavit," so that the IRS might apply additional return-screening
procedures. Sadly, conventional credit-monitoring services are useless
against income-tax identity theft.

Continued in article

Question
Why do thieves want taxpayer ID numbers?

Answer
The most obvious reason is to collect your tax refund before you get around
filing for it. They would also like our earned income credits to flow to them in
tens of billions of dollars in cash that does not belong to them. The primary
reason nearly half the taxpayers collect tax refunds rather than pay any income
tax is due to those earned income credits. And the Cliff Prevention and
NASCAR Racetrack
Construction Bill passed on January 1 restored those earned income credits big
time.

Instead of appropriately dealing with gang-related
violence, an independent Chicago school closure commission is recommending no
school closures because such a move could force students to cross gang
lines.

So in Chicago, gang violence is the “new normal”
and instead of combating and gaining some control over the problem, city
leaders are simply accommodating it.

Wow. Gangs of street punks are now influencing
public policy and million dollar decisions. It looks like they really have
won.

Of course the Chicago Teachers Union, which stands
to lose money if schools close, agrees with the recommendation.

The CTU has been arguing against school closures
for some time, as the union is looking to stave off an increase in the
number of non-union charter schools, which serve about
50,000 students. A moratorium on school closures
would naturally mean that more union teachers will be needed and their dues
money will keep flowing to the CTU.

Chicago Public Schools are facing a $1 billion
budget deficit and now that the district has locked in an expensive
three-year collective bargaining agreement with the CTU, reducing labor
costs is not really an option. But consolidating schools and streamlining
operations is.

But now taxpayers might have to continue to pay to
operate half-empty schools because city leaders don’t seem to be willing to
deal with gangs. The Chicago Tribune
reportedthere are 100,000 empty seats in schools
in a district that has 400,000 students.

“CPS built new schools to relieve overcrowding in
some communities but failed to close enough of the older, emptier ones,
often caving to community pressure,” the newspaper reported.

Those half-empty schools are among the city’s worst
performers academically.

The latest excuse shows the CTU will stop at
nothing to protect the miserable status quo, regardless of the consequences
for Chicago’s children.

Somewhere along the line I remember a song about
how you can take the kid out of the country, but you can’t take the country
out of the kid. Guess one could write a song, you can take the kid out of
Chicago but you can’t take Chicago out of the kid.

In October of 2008 my warnings went unheeded
regarding candidate Barack Obama. All one needed do to see America in four
years was to look at Blagojevich’s Illinois. It turned out worse than
imagined.

Blago was a living example of liberal economic
illiteracy when he quadrupled fees on trucking companies not realizing
trucks have wheels, and 25,000 jobs were lost overnight. The exodus from
Illinois was underway.

After getting caught with something ‘golden’ Blago
was impeached, tried, and sent to prison leaving behind a state in financial
shambles.

Enter Pat Quinn from Chicago. Another graduate of
the Chicago School for Liberal Economic Illiteracy Quinn shoved through the
biggest tax increase in Illinois history during a lame duck session.

That was in January 2011 with projected revenues
that would solve all Illinois’ money woes with $7 billion in new revenue. By
the end of 2011 the tax increased revenue by only $6 billion, and Quinn
began his version of austerity measures which of course failed.

To see where Obama is taking America look to
Illinois at the end of 2012. Here’s the report card; unfunded pension
obligations up, budget deficit up, deficit spending up, unpaid bills to
state vendors up, credit downgrade probable, talk of more taxes.

You can expect the same results from the economic
illiterate in DC as the economic illiterate in Illinois. Obama’s attack on
the wealthy with the cliff tax deal, and new Obamacare taxes will kill jobs
too, just on a grander scale.

Obama must have at least one liberal adviser with a
calculator because the day after raising taxes over $600 billion on the
wealthy Obama was calling for a trillion more in revenue by eliminating
deductions for the evil rich who are keeping the economy down.

Liberal hopes were dashed during the just concluded
lame duck session in Illinois. While the state is bursting into flames of
insolvency citizens were aghast that the lame duckers didn’t move on pension
reform, gay marriage, and bans on assault weapons.

Aspendthrift (also called profligate)
is someone who spends money prodigiously and who is extravagant and
recklessly wasteful, often to a point where the spending climbs well beyond
his or her means. The word derives from an obsolete sense of the word
"thrift" to mean prosperity rather than frugality,[1]
so that a "spendthrift" is one who has spent his prosperity.

In reality, our government has been creating more
than one trillion dollars out of thin air every year for the past five. The
only difference is that the blatant dishonesty of a trillion-dollar platinum
coin is so easy to understand that the public simply couldn't be expected to
swallow it. The American people are more than willing to be fooled, but they
won't tolerate so simple a ruse.

People have a long and intimate history with coins.
Some of us collected them as kids, and we all touch and see them every day.
Unlike currency bills, we know intuitively that a coin's value is supposed
to come from its metal content. That's why quarters are bigger than dimes.
As a result, most people have viscerally rejected the platinum coin idea. To
assign an arbitrary, sky high, valuation to a small piece of metal strikes
most people as a deceitful, desperate act. They are right.

However, the same people have no problem with
images of thousands of crisp paper notes flying off the printing presses.
The acceptance is not impacted by how many zeroes the bills contain. People
simply believe that paper money derives value from the numbers, not the
paper. This was not always so. Paper money originally entered the public
awareness as promissory notes to pay different amounts of gold. Once people
got used to the paper, few really cared when the gold backing was finally
removed. As a result, the public would likely have been much more accepting
of the Fed printing a trillion dollar bill than the government minting a
trillion dollar coin. But there was no legal pathway for the Fed to simply
give that money to the government.

The government, not the Fed, mints coins, so they
did not have to rely on the Fed to create value out of thin air. That is why
the platinum coin idea was so seductive, if ultimately unsellable.

Jensen Comment
Peter could have simplified his posting by simply stating that the only problem
with the trillion-dollar platinum coin is nobody in the world would/could make
change when using it to pay an invoice. The same problem would exist for a
trillion dollar bill. The only way to print money out of thin air is to print
bills in denominations small enough to easily make change using existing
currency.

Federal Reserve Chairman Bernanke announced this week that he plans to
continue printing money out of thin air until the unemployment rate lowers to
6.5%. With the explosion of robots in manufacturing an unemployment rate this
low may be unattainable ad infinitum.

Why worry about a debt ceiling if the government is can simply print money to
pay its bills?

As of November 2008, unofficial figures put
Zimbabwe's annual inflation rate at 516
quintillionpercent, with prices doubling every
1.3 days. Zimbabwe's inflation crisis was in 2009 the second worst inflation
spike in history, behind the hyperinflationary crisis of Hungary in 1946, in
which prices doubled every 15.6 hours

One day before we know it there will be USA trillion dollar coins or bills
that will be used to make change for $100 trillion dollar bills and coins.

Jensen Comment
Corporate megafarms have it pretty good in the USA. Taxpayers subsidize their
profits while, at the same time, also bear the risk of their crop failures. The
above article also shows how the crop insurance is a windfall for private sector
insurers. If climate change persists with drought disasters it can only get
worse for taxpayers. Oops I forgot, the government will simply print new money
to pay off the megafarm corporations.

Oops I forgot, the government will simply print new money to pay off the
megafarm corporations. Who cares if it rains or shines?

From the Scout Report on January 18, 2013

In an era of declining fortunes, cities and regional authorities look
around for tax revenue

A southwestern Pennsylvania hospital will stop
delivering babies after March 31 because its obstetricians are either
leaving or refocusing their practices, and because hospital officials
believe they can’t afford it based on projected reimbursements under looming
federal health care reforms.

The Windber Medical Center, about 60 miles
southeast of Pittsburgh, is losing two obstetricians and two others are
shifting their focus more to gynecology.

Hospital officials say the population of women of
child-bearing age is dropping and that the number of births the hospital
would be called upon to perform isn’t enough for it to provide the service
in the face of lower reimbursements under the federal Affordable Care Act.

The hospital delivered about 200 babies each year
since restarting its obstetrics program in 2005.